Romania has new Civil Code - Modifications concerning trust (fiducia)
The New Civil Code broght tremendous change, since it took effect last year.
(PresseBox) (Berlin, )It will, for the first time, regulate the fiducia, a mechanism similar to the English common law concept of a trust. Fiducia is the legal relationship by which one or more settlors transfer present or future rights to one or more trustees. The fiducia must be expressly established by law or by authenticated contract. Trustees can only be credit institutions, investment management companies, investment companies, insurance and reinsurance companies, public notaries, or attorneys at law. To bind third parties, a fiducia must be registered at the Electronic Archive of Security Interests in Personal Property. Where applicable, registration in the Land Book is also required. Within one month from its conclusion or date of amendment, the fiducia or its amendments must be registered with the competent fiscal authorities; otherwise it is null and void.
The fiducia is governed by the law chosen by the settlor. If no applicable law is chosen, the fiducia is governed by the law of the state with which it is most closely connected. The New Civil Code also significantly amends previous regulations with regard to limitation periods – the period of time within which each court action must be registered.
The most important change is that the parties to an agreement can now decide on the limitation period to be applied to their legal proceedings related to that agreement. Before, the limitation period was provided by law and any attempt to vary it would have led to the annulment of such clause.
Parties are not allowed to set a limitation period of less than a year or for more than ten years. Default limitation periods for various agreements and situations can be for one, two, three or ten years.
The New Civil Code also introduced amendments concerning lease agreements. Lease agreements for commercial premises are now expressly regulated as a distinct category of leases. As such there are provisions referring to term, lessee’s preference right to agree to a new lease, eviction and claims against sublessees, which are applicable not only to residential leases but also to commercial leases (unless the parties agree otherwise).
Parties may enter into both fixed term leases and leases for an undetermined duration. However, under the New Civil Code the maximum term for a lease agreement is 49 years.
The New Civil Code has introduced a provision that the lessee of an expired lease has a right of preference to enter into a new lease of the same property in equal terms to the ones agreed upon with a new lessee. A lessee does not have a right of preference if he or she has not performed all obligations under the expired lease. The parties can explicitly agree in their lease to exclude the right of preference.
The New Civil Code provides that a lessee may only be evicted from leased property by court order. Therefore a landlord may find it more difficult to evict a lessee by his or her own means. The New Civil Code provides that in the case of non-payment of rent by the headlessee the landlord has direct recourse against the sub-lessee. In such a scenario the sub-lessee would be bound to pay any amount owed to the headlessee directly to the landlord.
It provides that notarized lease agreements and those in writing and registered with the fiscal authorities are classed as writs of execution. From a landlord’s perspective, entering into a written agreement and registering it with the fiscal authorities may save a significant amount of time and costs with regard to notarization and enforcement procedures.
Upon the New Civil Code coming into force on October 1, 2011, the law on tenancy farming was repealed. While some old provisions have been retained in the New Civil Code, the current framework seems to have dispensed with some of the restrictions of previous law, overall becoming more farmer-friendly. Specifically, the New Civil Code no longer includes the farmer’s obligation to ask for the landowner’s prior approval in order to invest in the farming land. It also no longer gives the landowner the right to check on how the farmer fulfills his or her obligations under the agreement.
Any individual or company (Romanian, foreign resident or nonresident) can be a tenant farmer. For individual farmers who are EU citizens with residence in Romania, there is no current restriction on acquiring agricultural lands. The legal restriction on acquiring agricultural lands in Romania imposed on EU individual farmers (non-resident in Romania) and companies set up in EU countries will expire in 2014. However, such foreign entities can still set up special vehicles governed by Romanian law (such as limited liability or joint stock companies) that can purchase agricultural lands until the restriction lapses.
The New Civil Code changed Romanian law in many areas. This is only a selection of new rules of the New Civil Code which may be of interest to business.
Anca Dascalu, ECOVIS Monica Carmen Esterka Law Office, Bucharest, Romania, firstname.lastname@example.org